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The setting<\/strong><\/strong><\/p>\n\n\n\n 332\ndelegates from 40 countries attended the 35th<\/sup> bi-annual\nInternational Association of Agricultural Production Insurers (AIAG) congress\nin Bordeaux this October. AIAG organizes this congress for a sharing of the\nrespective national experience in insuring crops and livestock, and for\nknowledge transfer. Furthermore, AIAG reports on the results of field work for\nloss adjusters and specialist topics relating to livestock, in the form of\nspecialist seminars or workshops. <\/p>\n\n\n\n Agricultural\ninsurance is above all a national business with a long tradition stemming from\nits origin in the 19th<\/sup> century in Europe, when farmers established\ntheir own mutual insurance companies. A handful of agricultural insurers today\nventure cross-border into neighbouring markets, a trend that can be observed\nonly in Europe. There is a strong dependency of national agricultural insurers\non the globally active large professional reinsurers, who, with huge balance\nsheets provide not only very substantial aggregate capacity for the natural perils\nthat inflict damage on crops standing in the fields through reinsurance\ncontracts, but are also active with the leveraging of underwriting and\/or product\nexpertise gained through their diversified portfolio experience across many\nmarkets. Added to which insurtech know-how can\ncreate a greater transparency and efficiency across the value chain of crop\ninsurance. <\/p>\n\n\n\n Programme\nhighlights <\/strong><\/p>\n\n\n\n Delegates\nenjoyed a thought-provoking programme with as guiding topics \u201erisk management\nfor agricultural production\u201c, \u201eclimate volatility\u201c, and \u201ethe role of the\ninsurance sector and the state\u201c, along with splendid hospitality offered in\nBordeaux by the French insurance industry. Naturally\nit was not possible to avoid a sampling of some of the best vintage Chateau\nBordeaux wines.<\/p>\n\n\n\n Meanwhile a\nstandard ingredient of the AIAG programme, was a concise overview with updated\nexperience from the world\u00b4s largest agricultural markets: namely with presentations\non the USA and China, with only India missing from the big 3. The USA, China\nand India are collectively reporting gross premium income of $22 Billion in 2017,\nwhich accounts for roughly two-thirds of the global agricultural insurance premium.\nIt is well worth studying the market order of these 3 markets, because despite\nthe different political systems in each country, each has adopted a\npublic-private insurance system that has gone a considerable way to reduce the\nprotection gap for farmers.<\/p>\n\n\n\n The morning\nof the first day was devoted to the host market France, where agriculture is of\ngreat national importance and is very well organized, as we learned from the\nMinistry of Agriculture. It was interesting and surprising to understand just\nhow poor the trading experience of French crop insurers has been in the last\ndecade, with the impact of climate change visible in the loss count, and with a\nresponse from French insurers and reinsurers now afoot to introduce index\ninsurance, e.g. for grassland.<\/p>\n\n\n\n The\nmajority of the other presentations focused on the guiding topics of the\ncongress:<\/strong> <\/p>\n\n\n\n 1.<\/strong> Risk management for agricultural production<\/strong><\/p>\n\n\n\n It would\nmake sense to define the term \u201erisk management\u201c in an agricultural context. It\nmust go beyond the classical agronomical definition, because climate change,\nsustainable land use, price sensitivity due to trade wars and pollution are\nchanging the game. We need a more holistic appraisal of risks for crop yield,\nif we are going to succeed with their management. The agricultural insurer must\nshow more creativity here and interact with his clientele. They should also\nunderstand the manifold benefits for the insurance processes that can be gained\nfrom a clever implementation of Agritech solutions.<\/p>\n\n\n\n We must\nalso talk about the clients or risk population of an agricultural insurer and\ntheir respective risk management or indeed risk management needs. Because in\nthe drive for ever more efficient agricultural production to feed the world\npopulation, in most markets we now have 5 different customers: <\/p>\n\n\n\n each one\nwith a different financial status, with a different risk management approach,\nand with a different insurance purchasing perspective.<\/p>\n\n\n\n Agricultural\ninsurers must understand these demographics and cater accordingly with a\ndifferentiated service for each client category. <\/p>\n\n\n\n Agro-industrial\nenterprises are expanding rapidly in many markets, and whilst these enterprises\noften draw on sophisticated risk management technique including monitoring\nthrough remote sensing, there is a lack of sophisticated tailor-made insurance\nsolutions locally to respond to their needs. <\/p>\n\n\n\n 2. Climate volatility<\/strong><\/p>\n\n\n\n The\ndominant workstream under this heading in the congress presentations was weather\nrisk under the impact of climate change<\/strong>, gloomy predictive analytics\nrelating to this risk, and the featuring of (parametric) insurance and\nreinsurance solutions that can alleviate the rising loss curve, at a price that\nmust be collected through primary insurance premium. It is fair to say that the\ninitiative here would appear to come from the reinsurance industry alone.<\/p>\n\n\n\n It is\nimportant to note that there is a vast amount of scientific analytical work available\non the climate risk for agriculture, especially from the IPCC network and from\ntop scientific institutions like Wageningen Research (WUR) or the Potsdam\nInstitute for Climate Impact Research (PIK). This must be sorted, classified\nand put to use by systematic data mining, structuring and digitizing the data\nand making it available for risk modelling, by country, by region, by crop and\nby peril. This will serve to prepare for and provide insurance that is tailored\nto a multi-peril environment in a given market increasingly affected by the\nimpact of climate change. <\/p>\n\n\n\n Climate\nmodels are being developed to evaluate the risk of weather-related events. The\ninformation generated by them can be used for a technical pricing of crop\ninsurance. Such climate models are instruments to identify changes in the\nstatistics of the weather elements (e.g. temperature, precipitation, drought,\nwind speeds, flooding). Vulnerability functions are needed to translate weather\ninto predicted losses. The resulting climate statistics cover longer periods of\nat least 30 years. The climate change can be made transparent by a comparison\nof statistics of two such time periods. A single extreme weather event cannot\nprove climate change.<\/p>\n\n\n\n There is\nclear evidence of rising temperatures worldwide due to increasing greenhouse\ngas emissions, with the strongest signal in the higher\nlatitudes. <\/p>\n\n\n\n 3. The role of the insurance sector and the state<\/strong><\/p>\n\n\n\n Two markets\nstand out globally with an optimized public-private crop insurance business\nmodel: the USA and Spain. In both markets public\nsector (government) and private sector (insurance industry) share the risks\nimpacting on crop yield in a pre-agreed market order and a medium- to long-term\nstakeholder agreement. They can be regarded as \u201ebusiness models\u201c in principle\nfor emulation, to be adapted in practice for other given market situations.<\/p>\n\n\n\n Agricultural\ninsurance cannot be successful without a deal with the \u201estate\u201c. Interesting\nthat in the dominant market with liberal capitalism, the USA, we find the most\ncomprehensive public-private scheme supporting the farmer! Disappointing and\nfrustrating for agricultural insurers is the situation in the European Union,\nwhere a common agricultural policy (CAP) with its subsidies gives farmers the\nimpression that whatever happens they will have public sector \u201eprotection\u201c in\nthe form of a transfer payment. Thus, creating\nan anti-selection situation for the agricultural insurer, who has to contend\nwith the highly exposed risks.<\/p>\n\n\n\n G&Co. Comment & Summary<\/strong><\/p>\n\n\n\n Agricultural\ninsurance is a highly complex segment in the insurance industry, and is faced\nwith considerable technical and financial challenges for crop insurance in an\nera of accelerating climate change, and with a rampant spread of diseases in\nlivestock insurance through globalisation of the livestock trade. This is a\nbusiness for professionals. Amateurs seeing it as a part-time game should exit\nthe market. <\/strong><\/p>\n\n\n\n Very\nregular contact and solution-driven debate is needed amongst stakeholders in\nagriculture (state, insurance industry, farming associations, scientific\ninstitutions) in a joint venture to better understand, monitor and manage the\nrisks and define in a medium to long term perspective the best form of\npublic-private cooperation in each market.<\/strong><\/p>\n\n\n\n The\nagricultural insurers must be given access to know-how and technology, and take\npart in climate risk modelling, which can be carried out via an open source\nplatform.<\/strong><\/p>\n\n\n\n A reform\nof the European Union\u00b4s Common Agriculture Policy (CAP) due in 2020 will put\npressure on single EU governments to address risk management in agriculture\nwith more verve and technical dexterity. We expect this should improve the odds for agricultural\ninsurers operating in these markets.<\/strong><\/p>\n\n\n\n Viewing\nthe experience of crop and livestock insurance in Europe in recent years, there\nis certainly no room for any rebate on the premium side. On the contrary, in\nview of a rising climate-driven loss frequency, premiums must be increased. Climate\nrisk modelling will document and underpin this need.<\/strong><\/p>\n\n\n\n Costs\nfor many agricultural insurers exceed 30% of premiums and these are simply too\nhigh to generate a good return. The implementation of Agritech tools made for\nthe insurers, together with a digital business process reform could\nsignificantly reduce the cost ratio.<\/strong><\/p>\n\n\n\n In the past decade drought has become the Nr. 1 elemental risk for farming, and the technical experts for agriculture in the reinsurance industry are developing and have implemented first workable risk-transfer solutions for this systemic risk. These solutions fall into the technical category of index or parametric insurance, and must be tried and tested for their acceptance by the farming community. A considerable amount of work is still needed in the near term before a true penetration with meaningful sales has been achieved, and the stakeholders in agriculture must dive deep into this topic if the Nr. 1 risk is to be covered by the insurance industry. <\/strong><\/p>\n\n\n\n <\/strong><\/p>\n\n\n\n Your contacts for an improvement of productivity in agricultural insurance:<\/strong><\/p>\n\n\n\n Christopher Genillard Lukas Linden Claudia Duggal <\/strong> Author:<\/p>\n Christopher Genillard<\/p>\n Managing Director<\/p>\n <\/p>\n Contact Information:<\/strong><\/p>\n Genillard & Co. GmbH Germany<\/p>\n Phone: +49-89-2060688-0<\/p>\n Fax: +49-89-206068888<\/p>\n info@genillard-co.de Agriculture insurance companies from around the world gather to discuss the future outlook for their business in an era of Climate Change The setting 332 delegates from 40 countries attended the 35th bi-annual International Association of Agricultural Production Insurers (AIAG) congress in Bordeaux this October. AIAG organizes this congress for a sharing of the respective… Continue Reading AIAG Conference 2019, Bordeaux<\/span><\/a><\/p>\n","protected":false},"author":17,"featured_media":18757,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[6],"tags":[],"class_list":["post-18791","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-6","description-off"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.genillard-co.com\/de\/wp-json\/wp\/v2\/posts\/18791","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.genillard-co.com\/de\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.genillard-co.com\/de\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.genillard-co.com\/de\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/www.genillard-co.com\/de\/wp-json\/wp\/v2\/comments?post=18791"}],"version-history":[{"count":1,"href":"https:\/\/www.genillard-co.com\/de\/wp-json\/wp\/v2\/posts\/18791\/revisions"}],"predecessor-version":[{"id":18793,"href":"https:\/\/www.genillard-co.com\/de\/wp-json\/wp\/v2\/posts\/18791\/revisions\/18793"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.genillard-co.com\/de\/wp-json\/wp\/v2\/media\/18757"}],"wp:attachment":[{"href":"https:\/\/www.genillard-co.com\/de\/wp-json\/wp\/v2\/media?parent=18791"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.genillard-co.com\/de\/wp-json\/wp\/v2\/categories?post=18791"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.genillard-co.com\/de\/wp-json\/wp\/v2\/tags?post=18791"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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